Field of the Invention
The present disclosure relates to a system, computer processing device, computer program recorded on a computer-readable recording medium, and method in which a credit card payment network facilitates and implements installment payment transactions on behalf of an issuing bank.
Description of Related Art
In credit card payment networks, a card network provider (e.g., MasterCard®) operates as an intermediary between a merchant's bank (i.e., acquiring bank) and an issuing bank, through which a credit card customer has an account. As used herein, the term “credit card” refers to credit cards (MasterCard®, Visa®, Diners Club®, etc.) as well as charge cards (e.g., American Express® and department store cards), among other debit cards such as those that are usable at ATMs and many other locations, or that are associated with a particular account, and hybrids thereof (e.g., extended payment American Express®, and bank debit cards with the Visa® logo, among others) or any other present or future financial transaction card having similar characteristics.
When a customer uses his or her credit card as payment for a transaction, the issuing bank, in effect, loans the amount of a transaction to the customer. The issuing bank may impose an interest charge for the transaction, depending on when the customer pays the issuing bank for the amount of the transaction, and potentially other charges. In operation, when a customer uses a credit card to pay for a transaction with a merchant (e.g., at a point-of-sale (POS) terminal, via a remote transaction such as over the phone, a mail-in order and/or a transaction conducted on the Internet), the acquiring bank of the merchant receives payment by the card network provider, which in turn receives payment from the issuing bank of the customer.
Issuing banks offer installment payment options to their credit card customers, by which the issuing bank loans a predetermined amount of money to a customer, and the customer, in turn, is required to pay back the loan over a predetermined prepayment period, based on a contractual arrangement between the issuing bank and the customer. An installment payment option differs from a credit card transaction, in that in an installment payment option, the customer and the issuing bank contractually agree that the customer will pay back the amount of a loan over a specified time period. For example, if the issuing bank loans $300 to the customer, the contractual arrangement may stipulate that the customer will pay $100 to the issuing bank each month for a total period of three months, plus any additional fees such as interest, for example. An issuing bank may use a particular good for which the installment payment option was extended as collateral until the installment loan is repaid in full. In conventional installment payment options, the issuing bank processes the loan after determining the creditworthiness of the customer and the prepayment period.